About this Show

Mad Money

News/Business. (2013) New.

NETWORK

DURATION
01:00:59

RATING

SCANNED IN
San Francisco, CA, USA

SOURCE
Comcast Cable

TUNER
Channel v58

VIDEO CODEC
mpeg2video

AUDIO CODEC
ac3

PIXEL WIDTH
704

PIXEL HEIGHT
480

TOPIC FREQUENCY

Goldman Sachs 7, Jim 6, Us 3, Coca-cola 2, Ameritrade 1, Mit 1, Underpriced 1, Ka 1, Facebook 1, Handiy 1, New Blackberry 1, Florida 1, Washington 1, D.c. 1, Aflac 1, Obama 1, Elan Music U Musk Company 1, Tesla 1, Wren 1, Uconn 1,
Borrow a DVD
of this show
  CNBC    Mad Money    News/Business.  (2013) New.  

    July 8, 2013
    6:00 - 7:00pm EDT  

6:00pm
>> regional banks have been screaming. my favorite is zion. as long as it stays above 30 there's no reason the stock can't keep going. it's an under . >> my mission is simple, to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere. i promise to help you find it. "mad money" starts now! >> hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends, just trying to make you money. my job is not just to entertain you. it's too teach you. call me. 1-800 h.cnbc. every night i come out here and help you find well quality stocks well worth earning, stocks that i think will reward
6:01pm
you by paying juicy dividends or often both. perhaps my four decades in the business, i leave way too much unsaid and take too much knowledge for granted. knowledge you need to know to be the best investor you can be. so tonight, i'm taking the time out to impart some of that knowledge in a special show about the way stocks really work and how they interraelt or don't with the companies they stand for and are supposed to represent. on "mad money," we analyze companies, try to figure out what makes them tick. what should we be watching for? what goals should we meet? we don't trade these companies. we invis in stocks. you should never forget they aroundt the same thing. it's obvious. the kind of thing that should go without saying. people equate a company with its stock. and it's the kind of mistake that can wreck your portfolio, especially in volatile markets like these, many trade off on
6:02pm
big picture about the broader global economy rather than what's known as the micro, getting information about the actual individual companies behind the stocks, macro still woouls rules, when it's good, it goes higher, when it's not, it goes lower. we see this play out all the time. a stock gets crushed. we assume something must be wrong, otherwise, why else would the stock be pounded? on the flipside, when it surges, we assume it has to be doing something special, something right. it's simply not how things work. often companies will have big moves, ups or downs. that's okay. it happens all the time. it doesn't mean the market is crazy or irracial. what's irrational, though, is believing there will always business a straight line, a lock step between the performance of the company, there wouldn't be "mad money." we wouldn't have much to explain. shouldn't stocks trade based on changes in the stocks in the 81
6:03pm
lying company. isn't that the way the markets should work when it isn't broken? do we spend time analyzing companies, figuring out what makes businesses better than others? teaching you how to identify situations where companies are improving or doing better then people think. the increases is in earnings estimates for the underlying company. nothing correlates more strongly with the rise in share price than estimate increases. increasingly, i equate it with success. why isn't it enough to study companies and buy the stocks of the ones that look leak they have the most to grow earnings faster than expected? why isn't it enough to invest in home? because we can't boy companies, unless you got hundreds of millions of companies to go around. simply not an position. shares of stock. shares that trade on an open market where you have lots of buyers and sellers who mate have
6:04pm
different motvations from you. when you find a high quality company, you can't assume shares of the company will go higher sense you need to take into account the stock, the way the stock trades it. the way it trades in the market. up and down. don't get me wrong here. of the long haul the best way to identify winning stocks is to identify winning companies. ones growing faster than anyone expects, are improving dramatically. i'm not changing my mind one bit. is still the way to go. but, you should call me on a day-to-day basis? it doesn't work. these stocks on a day-to-day basis can trade wildly with no relation to what's happening at the company. those moves may be confounding. so confounding you sell low or buy higher, or give up entirely. you know i think you need to stay in the game if you augment that paycheck and save money for retirement, vacation, tuition. all the necessities of life. if you assume every everything
6:05pm
makes sense, you will end up opportunities merchandise marked down for irrational reasons, you know what, you will mits when you should sell stocks that are run up too much courtesy of market mechanic, rather than anything related to the company. in recent years, we've witnessed the rise of a ton of factors that can cause a stock's performs to differ more erratically from the underlying company. at least in the near term. over the long term, they do tend to done verge, over day, weeks, maybe even months, you have all sorts of things that can make a stock of an improving company fall or a deteriorating company rise, these way they change to get expose years. some etf allow them to boy or sell or selling bang for their buck. this needless proliferation of etfs means that some stocks in the sector can trade in lock step with each other.
6:06pm
the good moving in complete tandem with the bad and the mediocre as ultimately the facts are out because they're in that basket, stocks that shouldn't go up do go up. now a business sector has been determinant of a stock's performance. if a stock is a house, then it sectors the neighborhood and nobody wants a good house in a lousy neighborhood. >> house of pain! >> but these days, the influence of these etfs, i think has become noxious to those of us trying to discern the weak from the rest. it's too important. plus you also have the high frequency traders who can hijack an entire market causing massive across the board moves that make no sense from the fundamental also, especially at extreme volatility. these new waves all historic beaches from the flash crash and myriad other short-term blips down. of course, when times get tough
6:07pm
for companies, they can get much tougher for their stocks. i spent the problem of foretelling on the show, financial institutions that own them are in trouble. they desperately need to, sell, sell, sell, in order to raise cash. you see this happen every time a bunch of hedge funds make the same bet. you saw it in banks, you saw it in gold recently. the thing doesn't go the other way, europe lost when the euro zone sovereign debt crisis, they didn't have to sell the european assets. they had to sell everything, totally unrelated stocks, too, they got hurt so bad. especially when they were clamouring to get their money back. this is what happened in 2008, 29 when selling began foresell, it took them back to that generational low in march of 2009 the reverse happened in 2012 when those who bet against european stocks, almost all stocks, particularly the financials had their heads given
6:08pm
to them when they but their foot down and re-inflated banking institutions and lending money all over the place t. bank stocks soared. it didn't matter whether the bank was solvent or invol sent. they all blew up toke. in an investing world dominated by hedge fund, most of which have to make bets for and again stocks and home markets every day, their influence must be taken to account. we understand how the stock can differ from the common underneath, when they get hit with unexpected good news, you can get what's known as a short squeeze that pro pels it to absurd heights that sellers have to buy to close occupy the positions. a lot of people feel that's what happened to tesla. elan music u musk company. remember, the market is well a mark, which means it is dominated by supply and demand. so when there is not enough supply of a given stock or kind of stock to satisfy that demand,
6:09pm
you kwuld see a stock rise beyond what you'd expect based on the fundamental also of the companies. when is there is too much stock relative to demand, shares get hammered well beyond where you thought they could go. we saw a lot with the chinese internet ipos? 2010, len 2011. first these deals were staggering. everyone got so excited. they wanted nothing but china. but the games became smaller and smaller and smaller as we got more and more chinese dot-coms come public. ultimately, they flooded the market, at the end of our dot-com bomb. with the deluge of social media deals in 2011 and 2012, in the end, no chinese deal is worth anticipating. demand is well oversaturated. this is one of the reasons the chinese ipos reached their lowest level, two deals completed. an 83% decline from 2010.
6:10pm
in the end, the buyers of the last media social companies out of the chute, the groupones and zyngas. they were crushed by insider bailing seemingly at any price imaginable. the public was first fascinated and then turned on them with a vengeance that i haven't seen since 2001. and, of course, the fundamental also were never any good to begin with. boy, did that have be u.s.? the bottom line, recognize what's happening with your stocks doesn't reflect what's going on with the underlying business. use that fact to your advantage. when a company that's in terrific shape sees its stocks smashed for reasons unrealed to the fundamental business. can be an amazing buying opportunity. remember it can sometimes take a long time for the action in the stock to sync up with the performs it represents a tiny piece of. way you won't be frustrated with what you thought you heard
6:11pm
moodily. instead, you can wait until the market gets smart and rewards your stock with the move it deserves. let's go to dave in virginia, please. dave. >> yes, how are you today, jim? >> i'm real good, how about you? >> i am doing real well. i have a question of after market trading, i was curious what exactly is it? who gets to participate in it? what are the ups and downs of it? >> anybody can participate. the market doesn't really closearm at 4. there is bids in their offers. i don't like it. i don't like it because it's unregulated so to speak. there is not a lot of depth to the market. can you buy something too highs, selling it too low. i encourage homework, no snap judgments. stay away. jay in texas. jay. >> hey, boo-yah, jim. coming from south texas. >> how are you? >> caller: just fine, thank you. the question i had for you, jim, is if there is distribution in a
6:12pm
stock throughout the day, meaning more sellers than buyers. how is it that many times the stock can defy gravity and close up for the day? >> well, i mean the sellers do sometimes complete and while the sellers are selling, buyers are getting lined up by brokers who say, listen, i got a big seller. what happens is the stock goes down. wren when the final piece trades, all these buyers converge. they end up overwhelming that last piece t. stock goes higher. that's what happens time and time again. look, sometimes the stock's performance doesn't matter the underlying business. i know that can shock you. it can take a while for the two to sync up. if you get a bargain, please be patient. wait, your rewards will beckon. "mad money" will be right back. .
6:13pm
6:14pm
6:15pm
6:16pm
. >> welcome back to tonight's ezegs of "mad money." stocks often diverge from the fundamental also of the companies they purport to represent. i though this confuses you mightily. i see this on jim cramer on twitter. i talked about the need for investors to get familiar with how stocks trade. you need to learn more about the traders and watch short-term moves and stock prices, but to take advantage yearn retrend e pretending the short-term gyrations in stock prices are beneath their notice and somehow pollute your gains. may we never be so important or self ar gant to think that entrance points don't matter. they control your ability to
6:17pm
outperform the market. they affect our profit margins. we care more about prices at the supermarkets than price of stocks we buy. so we square the idea when you buy the stock, it can become unglued. the fact about the business, how do you balance that with my insistence that you do your homework, read quarterly conference calls, transcripts, myriad research pieces not readily available on the web the new stores, stock prices you probably think are going to bounce around anyway. they're at the mercy of macro factors, etfs the companies can't control. does it sound familiar? or stocks remain hostage by big institutions and trade them. why am i giving you the focus on learning learning about the other company, given my homework is the least interesting part of the process, am i torturing you?
6:18pm
look, the fundamentals matter a whole lot. more importantly, the reason we focus is just about anyone that understands it can do it. it's all readily available. in short, you may think it's tedious and boring. it is easy in trying to predict so much out there that simply is unnoticeable. this stuff is available. it sure wasn't when i got into the business. look, investors are looking for an edge, a leg up that provides them with an advantage over everybody else. that will never change. not all advantages are of the same scale. by following my standard homework regimen you should have an edge over the people that trade the stocks you follow. how on earth is that possible? your homework is on available information. chej it out. armchair investors, the fact that the information is out there means it should be baked into the stock, meaning the share price should reflect what you know from your research. we know that's not how the market really works.
6:19pm
lots of people are real lazy, lots of money managers or technicians, they are looking at charts to dismiss the fundamental also or the kwauts that don't get down to the nitty-gritty of quarterly earnings calls. you will know more about the stocks than the professionals do. if that's not an edge, i don't know what is. home is about taking control of your own financial destiny, eliminating as much emotion as possible. that's why i focus on it. i know i will get result, not any results, the very factual objective kind doesn't come prey to a fiscal cliff that might be irrelevant. a sequester to your stock worries or a federal reserve minutes that don't mean a thing to your position? maybe the homework won't give you that much of an edge. we will give you what direction the stock will ultimately head. maybe it won't protect you from the whims of children in washington, d.c., who play with the economy willy nilly, our own
6:20pm
country. learning about companies is an all or nothing proposition. i don't think familiarizing yourself should be dismissed as less than useful because it doesn't immediately translate into immediate profit. remember, ultimately as i said at the top of the special show, stocks do tend to drift back into line with where they observe, they sink, in addition to knowing a lot of pertinent things about a business, you can assume your stock will probably end up within a certain price range. you got to wait long enough. you got to let it percolate. on top of that, as long as you keep up with the homework, will you have a clean way to cut your losses in a stock that isn't working. that's an incredibly valuable tool. especially when you claw your way back at it if the stock went down. you need to know enough to figure out whether you should be a buyer, you into ed to know whether opportunities really knocking or is your head about to be knocked in the canvass.
6:21pm
on the other hand, it will give you the conviction to stay in a good stock hammered by the market for wrong reasons. either way, you will always know why you are buying or selling something. you won't be beholden to anyone but yourself when it comes to your investment decisions. can you think over time, how many stocks have dropped because of a quick decline, you wished you had bought them. you didn't know the fundamental also, so the risk changing from good to bad or bad to good, courtesy of the home the better the position you will be able make. more calculated, intelligent risks, these skills are useful no matter what. but they are of paramount importance when it comes to investing stocks, the tension between needing to protect your capital and needing to risk that capital in order to make money. but even those these skills are handiy, they aren't what most people call compelling. they may not give you the total picture you need to get where you want to go. and as for the boredom factor, you know what, let me take care
6:22pm
of. that i spent years trying to make investing more successful. more interesting. intrigued if not entertaining. no sin, given that so many focus on scaring you out of your shoes. i think i have shown i will do anything with keeping investors gained on their money. i have come out on the set, filmed with a hazmat suit. i have taken a nap on a cozy bed on cheerios by general mills. driven on set by a lawn mower to intrigue you to look into john deer. i can't put a figure on the dollars of expensive gizmos. i shed blood on the set to show you the insides of a brand-new boeing. yes, i chipped my tooth telling you not to touch the stock of crispy cream. i ate peperoni dog food and threw up on the set shouldn't after the show concluded. so i am not concerned too many will ship the homework. believe me, i will make this
6:23pm
sufficient entertaining for you no matter what. we have ways to make you motivated. the bottom line, it is important for you to know why you are doing all this work. what itself the point is? it's a way for you to build conviction in your stocks. it's a way to get an edge, one that's totally legal. in an era where so many panic at the sight of the president coming onto the podium on the speaker of the house giving a press conference, you need to know that it might be a buying opportunity and not just a selling one like the panicers all around you. i need to go to tom in florida. tom. >> hey, jim, a big boo-yah to you. jim, in january, i invested in july '9 when the stock was at 43. the stock still seals to be going strong. i'm up 104%. should i close out or hold on?
6:24pm
>> you sell common stock against it in a spread up top. 93rd, you sell tomorrow, you will sell, you know, a quarter of your position in common stock. you keep selling on the way up. if the stock takes a sudden downdraft, uconn to the play with the call. that's how i like to use that sfraj. okay. i need you to stop panicking. if there is a panic, i need you to take advantage of it. the only way to do that is to do the homework. it gives you the conviction t. conviction gives you an edge. after the break, i will try to make you even more money. [ male announcer ] it's time.
6:25pm
6:26pm
time to have new experiences with a familiar keyboard. to update our status without opening an app. to have all our messages in one place. to browse... and share... faster than ever. ♪ it's time to do everything better than before. the new blackberry q10. it's time.
6:27pm
♪ unh ♪ ♪ hey! ♪ ♪ let's go! ♪ [ male announcer ] you can choose to blend in. ♪ ♪ yeah! yeah! yeah! or you can choose to blend out. ♪ oh, yeah-eah! ♪ the all-new 2014 lexus is. . >> i want to tell you about a tool that can help you make money quickly but carries a certain amount of risk and can be trouble if you don't know what you are doing, investing in initial public offerings, ipos. it's impossible to present
6:28pm
themselves, there's been so many deals. many have gone through a premium and are red hot from the moment they are born others that fizzle from the opening bell. these are led in particular by technology an social media names, which have been met with exceptional hype, not enough skepticism. hype doesn't go into describe the buzz around that facebook ipo. that was super hype, maybe hyper hype for a company indeed that has excellent long-term prospects, sure, ipos are sexy. you are hardly ever told what to do with them. so i'm going to teach you the basics right now. when you know how to tell the difference between an about to be puk public company that will soar and one that could go down in flames, let's say you will have the potential to rake in serious profits. the lure of ipos is when you nail it, when you get in on the right one, can you have gains of 2030, 100% in a day, in a few
6:29pm
minutes time t. instantaneous nature of these profits makes them incredibly attractive. they can get in the way of your better judgment and cause you to invest in initial public offerings that end up stink up the room. don't let the brokers trick you into believing buying every ipo, the challenge is making sure your broker can fenagle you some shares. wrong, wrong, wrong. the investment banks will always try to slip in clunkers after they lulled you into thinking all the deals work. partially the public offerings tends to be all over the map, partially because there isn't that much available. there is a tendency to assume the success or failure of a given ipo is mostly a question of luck and that is also wrong. i think you can accurately try to physical out what ipos to figure out as uninvestible and which once appear to be bought,
6:30pm
buy, buy, buy. >> it isn't about luck. it's about analysis. the kind of home that professional money managers do all time and i advocate endlessly and tirelessly on the show. i know the pros have it right. i would analyze them the same way in my hedge fund. i made a boat load of money for myself and my clients at my old hedge fund by investing in ipos. i want you to know how i did it. here's inside baseball you need to know? i think the investment banks that underwrite all these deals have their own agenda, one i believe is often as much about bringing people, regular people, regular retail investors like you back into the game as it is to help clients raise money. one of the things i learned on wall street with stocks and bonds at goldman sachs and managing money for myself and the rich people in my hedge fund is when the market turns south, when it becomes difficult to raise main, people sell, sell, sell, you know what those brokers like to do? they like to throw them easy
6:31pm
wins, lay-up ipos intentionally underpriced. so they will pop when the shares start trading? why do i think they will underprice and short change the investment clients? it's just as important their other clients the ones that trade them commissions, keeping interested in the market. for most investors, the gains from a sweet underpriced ipo or offerings with a small flow, boost of shares, are a great reason to feel good about being in the stockmarket, about owning stocks, about buying stocks. when times are tough, they want to entice you back into the smashing. hey, that makes a lot of sense, right? they got to figure out ways, their business depending on you buying and the investors selling. by the way the companies don't mine this, as long as not too much stock is given away. for the anatomy of ipos, i need you to look at livingedin and groupon and rose 109% and 31% respectively in the first day of trading there. is no doubt these oftenings tuck
6:32pm
about a bubble in internet stocks. there is no doubt the issue is the artificial way they were priced putting out very little stock. a sliver, knowing it would cause a big pop and creating bubble by itself. the brokers knew these stocks would be hot and hype for the group. they knew if they offered a limited number of shares and set the pricing below the hyped levels, demand would overwhelm supply. the brokers tightly control the supply, partially to accounts they believe would thought flip the stocks and gave out enough to the large much wal funds that they would be able to start, not finish. way the mutual funds would be whetted and bid, bid linked interest in up and get the rest of the positions in, that's why linkedin kept soaring. never forget that the trip to a successful ipo is this rationing process. this syndicate deaths, they're
6:33pm
the ones that allocate the potential stock. they know how much the big funds, mutual funds ultimately need to be able to have enough linked in to impact their own performance. so what the syndicate does is they give them a percent annual. usually a third, sometimes half of what they need to own, what is known as half of a full position. that forces the client's hands to finish it in the open market. of course, they could flip the position themselves. ah, brokers have ways to monitor who takes that quick money. they may not be allowed to get big allocations the next time around. you benefit, though, the syndicate desk almost sabs some stocks arizona they know they are holding on to stock. not play that flipper game. i am actually indifferent. my goal, try not to make you money. one thing i don't think you should do ever is go into the after market. listen to me, i don't want you to go into the after market meaning i don't want you to boy it on the open market after it started trading.
6:34pm
particularly at inplated valuation levels. forget about it if you don't get in. i got staggering statistics that shows you, you are almost a sure loser if you buy a hot stock with a couple stocks allowing you to make money. most gigantic losers that could destroy your nestegg? >> hurks linked is in, a total winner. groupon still remains in the doghouse as so many of the shooting stars of the bygone era. the odds favor losing not making money in after market investing in ipos. trust me in that. remember, you are in a much better position. you don't need to buy a lot of stock above the offering price, in order to be sure you have enough shares. can you pick or choose, provided you do enough business. in the after market, wait until you get a reasonable entry price. performance, details before coming. in like with facebook in the fall of 2012. when 87 e everyone feared there will be a ton resell, just when the they got religion, that was the time to buy, not sell t.
6:35pm
weakest hands were gone, knowledgeable people jumped in. here's the bottom line, ipos can be a great way to make "mad money" f. are you not in the know, it can be a treacherous path. keep these mcnicks in mind. remember, the big guys do not necessarily have you the home gamer in mind. so beware and trust me, never, ever buy in the after market. for every one winner, there are ten losers. don't be a sucker. stay with cramer. .
6:36pm
6:37pm
6:38pm
. >> dealing with ipos is difficult and dangerous because the prospect is so enticing the euphoria can cloud your better judgment as everyone who got in on the aborted facebook deal knows all too well. that's why you need a consistent method to make sure you don't get torn to pieces by something you don't understand. a deal you can't fathom or make heads or tails of. so here's your primer on analyzing smoking deals and ice cold deals, the safer and the
6:39pm
dangerous. the first and most important thing i look for with an ipo isn't what the company does, believe it or not. it's the company's pedigree, why the blood lines. i care about who the executives are, who the investors are, but most important, who the brokers doing the deals are. the first cohort the managers can often be a relatively unknown group of people. strangely, it's the least important part of the pedigree. here's why. it's very interesting. many of the best deals represent technology companies, including social media and those companies revolve around an invention much more than a management team. look, if you looked at google's management team, for example, you would have avoided this ipo like the playing. think about it. who the heck are larry page and sergei brint? they're a couple 20-something wildmen. those relative new kids on the block have proven themselves as the new young innovators.
6:40pm
do you know more about mark zucker berg other thanp he wrote a movie and had struggles with the two tall guys? my second question, who are the investors? it's more of a negative check, a disqualifier if you will and a positive one. we are looking at the investors, i'm concerned about you getting caught up in another investment. one funded by private equity companies simply anxious to cash in on a better market. private equity firms, they have bought dozens of companies in the last few years, in many case, they paid far too much for them. they badly need to offload them into the open market to get them off the books. some will barely be profitable. some will be stinkers they will entice you with. the way i see it, these private equity ipos almost as a rule are difficult to judge, i'm not being that pejorative. some will work, but they're difficult. this brings up another important aspect of analyzing ipos,
6:41pm
recognize just because a company can be publicly trooid traded, that doesn't mean they are junk. there are many that qualify as a sham. some of the smaller social mia names fit this edge ka. they don't have to judge the quality of the business of ipos. they make them disclose as many facts as possible so you can judge yourself as home. and the brokers at least when they are dealing with the private equity firms. they do so much business with these outfits, they're hard to say no to. the brokerage houses get immense amounts of money when they take a company private and more fees when the company's spun off as a public entity again, including the large fees associated with the ipo, remember they buy back a lot of debt. they refinance. that's why the investment bankers will often bend over backwards to favor the private equity firm issuing shares rather than the brokerage clients buying them. you see main investors coming
6:42pm
public, let's calm it a yellow flag. it will be a red flag if there is a lot of bad meals. third, i look at the brokerage houses bringing the deal. this is rlly import it them to be major first. yes, y nik and it's wrong. why do i think this? let me tell you a story. in the 1980s as a young broker at the goldman sachs, i had personally helped work with the finances of the people behind a young company start up really by brilliant inventers out of mit. it's called thinking machines, this company's claim to fame was it had the fastest computers in the land. remember dow jones used it. it was so good for to back office and stuff. i had done so much work with the principles, when they decided to bring the company public, i was able to convince them to use goldman sachs as their deal manager. it was a big problem. there is only one problem. i couldn't convince goldman
6:43pm
sachs to put its name on the deal, despite the immense fees the ipo brings to the firm t. analyst that followed the company, he powered over the financials. he looked at the product. he made a judgment. he made a judgment that the company will have short-term momentum most definitely will not have any staying power. i was agassed. oh, man, i was looking at a big payday. i stood to make a big six-figure ticket to bring the deal to goldman sachs. this analyst, though, he simply wouldn't budge, reminding me that this was the goldman sachs, not some shlop firm that put its name on any company just because it was hot. sure if u sure enough we passed. in a couple years the company failed a. victim of better technology and poor financial management. >> the house of pain! . so take it from me. that's why the broker's pedigree matters, that's why i pass on deals that you never heard of,
6:44pm
with little or no track record. it doesn't mean every ipo will be a success. far from it. avoiding the smallers weeds out the failures. in the heyday, every firm good and bad got caught up. so there are never any assurance, checking the deal remains integral. nothing is perfect. that's why i have a checklist, hopefully, one of these will flag you. here's the bottom line. only after i have gone through that three-step betting process will i consider what the company does, imagine or what it makes or how it is done in the past. in part, balls it's so difficult to judge these issues. i would rather use the quick felter i went through before i even crack the books on a company. something i will teach you how to do after the break. ♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ]
6:45pm
♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. ♪ since aflac is helping with his expenses while he can't work, he can focus on his recovery. he doesn't have to worry so much about his mortgage, groceries, or even gas bills. kick! kick... feel it! feel it! feel it! nice work! ♪
6:46pm
you got it! you got it! yes! aflac's gonna help take care of his expenses. and us...we're gonna get him back in fighting shape. ♪ [ male announcer ] see what's happening behind the scenes at aflac.com. [ male announcer ] see what's happening behind the scenes we've been bringing people together. today, we'd like people to come together on something that concerns all of us. obesity. and as the nation's leading beverage company, we can play an important role. that includes continually providing more options. giving people easy ways to help make informed choices. and offering portion controlled versions of our most popular drinks. it also means working with our industry to voluntarily change what's offered in schools. but beating obesity will take continued action by all of us, based on one simple common sense fact... all calories count. and if you eat and drink more calories than you burn off, you'll gain weight.
6:47pm
that goes for coca-cola, and everything else with calories. finding a solution will take all of us. but at coca-cola, we know when people come together, good things happen. to learn more, visit coke.com/comingtogether . >> ah. we've reached the final step. how to analyze the actual company coming public. here you have to assess what the company makes. you have to ask if it's profitable. most important, if you think of
6:48pm
hanging onto the stock after the deal, you need to know how big the end markets are. that's so crucial. you have less information to go on. most is coming from the prospectus. figuring out what it does can be easy, if it has a big bands or consumer product business. under armor or crocs. it can involve a sophisticated product, especially with technology. these technology companies, like the ones checked to broadband or optimization, networking, semi conductor minimization, no wonder warren buffet says, don't go there. if a company is coming public makes a consumer product. first you got to ask yourself, is it a product you like in this isn't the only question, but it does matter, take the ipo years back, a thing called he'llies, shoes with wheels on. is a pair i absolutely despised. i predicted it would jump, the craze would soon pass, then a
6:49pm
long declimbing that took it to as long as a dollar and a few change a fewer years later. on the other hand, within a company has a good product, one you like and is profitable and solid financials, then you can catch the gains from the first day, the initial public pop and from an extended run afterwards. that's what happened with the under arm our uaipo. that was a mouth watering deal. i urged people to hang on, after taking profits, you have to take some off the table. remember, it's doubled. at that higher price, they were valued the same as nike. even though it had a much higher growth rate. that's an example of pricing that worked to your advantage. once in a while, you get a thrice blessed ipo, a lot of rom to run and a great brokerage house. lulu lemon, goldman sachs brought pub leg at $18 in 2007 t. stocks have continued to
6:50pm
grow, despite the 2008-2009 sell-off because of the gigantic addressable market, that initially was women, and it extended to all women, not just women athletes and some men, too. some of the best ones from 2012 to think about, organic food maker annies, discount retailer five below. enterprise software prior guide wire, salesforce.com. they all fit the three-prong test. in all these case, the trick is to recognize the size of the market the power of the competitors and try to physical out how the company is coming public is valued as similar players. deals like under armour or lulu lemon priced at significant discounts, they tend to be the good ones but are rare indeed. the bottom line to analyze the ipo, including the ob truce technology companies, rate the competitors see whether the company is profitable. make sure of the broker's
6:51pm
pedigree. then you will know whether it's worth it to put in for the deal. "mad money" is back after the brake. .
6:52pm
6:53pm
. >> well, cramerica, it's time for your tweets. first from at clark evans 3 who writes the following, why don't more companies split the stock? you are so on point here, clark. i got to tell you. one of the great things about
6:54pm
some of the stocks i toll low when they split the stock like a salesforce.com. you get a lot of liquidity. it makes it so the stock doesn't trade so herky jerky. there's companies that get to $300, $400, they must think they're entertaining berkshire hathaway. it does make it so individuals are much less scared of a stock. maybe that's enough, no value created. but very bro-retail. here's one from at t swizle wizle who writes advice for a young person. what's the best strategy for going about investing small amounts at a time, kwant or value? i like the stocks below 10 for my first stock, by five shares. way i get the feel the pain if it goes down. it's easier, only later do i start getting up to stocks, i know it shouldn't matter what the dollar amount is. i know the way you think.
6:55pm
i know you don't feel like a yale professor. you think like i did when i started. you apt a little capital. this one says diversified among assets or stocks, which should i be more concerned with? . >> okay. here's what i care about. i care about baskets. it can be etfs, i don't like etfs. i like to pick the individual stock or it can be individual stocks. remember, you skru have to think about what they do. i care about the end market. that's why i do diversification. if everybody's end market halls to do with finance or technology, then you end up being hurt. so consider who the customer is, if you are unsure about it. whether they're diversified. the next tweet comes to us from p. gallagher 3535. what's the best investment book you read? one from wall street, beat the street, two. peter lynch books.
6:56pm
they're really terrific. and i think that those are great places to get started. let's go to one from at j.e. hamilton, how many hours do you sleep each night? i tend to get three or four nights, except for friday and saturday night, i sleep twice or three times that. i believe, i know it sounds fanciful that you actually save up the sleep. if you get a lot of sleep on saturday night, you don't need to get a lot on sunday or monday and i don't. another great tweet comes from writes boo-yah, jim, you just finished your book. you got screwed. great book. i remember them saying why did you call it for? it was spot on how wall street sometimes can really stab you right in the face as well as the back. "mad money" is back after the break. .
6:57pm
6:58pm
6:59pm
. >> i like to say there is always a bull market somewhere. i try to find it just
7:00pm
is obama care dead? more delays and big changes for obama care. we know the employer mandate has to wait for a year. now comes the liar subsidies meaning no income applications for income applicants just like the housing bubble, remember? by the way, don't forget the small business insurance exchange was killed last month. folks, the individual mandate is next. how about the stock market? that's better ne